Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Mon July 9 2012 14:28:35

In Renaissance of Payment Services, Look to Needs of Small Seller

By: Ina Steiner

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Remember Billpoint, BidPay, Certapay, Citibank c2it, Cybercash and Yahoo PayDirect? Many companies were trying to succeed in the online payments space a decade ago, but many of them soon abandoned the space, leaving small sellers few options for accepting payments for online purchases, the most popular being PayPal or merchant credit card accounts.

That expansion of online payment services is happening again thanks to mobile shopping and, just as before, contraction is likely to follow. Former New York Times reporter Miguel Helft is now covering Silicon Valley for Fortune magazine, and today he wrote an in-depth piece on mobile payments, which he called a free-for-all in which "everyone wants in," from big phone companies to credit card networks to tech giants to startups as well as traditional banks, retailers, and makers of point-of-sale hardware.

The reporter spent some time with Square's Jack Dorsey (whom he says is often compared to Apple's Steve Jobs) and discusses its service called Register, a point-of-sale system for brick-and-mortar retailers that also allows retailers to "keep track of their customers and inventory (think lightweight enterprise software) and to offer loyalty deals and discounts (think Groupon but better targeted). Register also delivers analytics that tell merchants what their customers buy and when they buy it - the kind of data that, until now, only large offline retailers could afford to track."

It's interesting to observe the propensity of small businesses to embrace innovation and for larger companies to avoid risk. Large brands were wary of eBay in the early days - the marketplace succeeded because of many micro sellers. PayPal, which is now embracing retail chain stores such as Home Depot with its point-of-sale offering, succeeded because of micro sellers such as those on eBay.

Square has gained traction because it offered micro sellers the ability to easily swipe credit cards using its easy-to-carry card reader that came with a pay-as-you-go plan for small merchants. As Helft notes, "hairdressers, piano teachers, cabbies, and even babysitters" are using Square's initial card-reader offering.

The Fortune article summarizes what we've been hearing about digital wallets: "Not only will the phone or the tablet become a wallet for consumers, but it will also turn into a credit card reader and a register for merchants. Shoppers will use their mobile device as a coupon book, a comparison-shopping tool, and a repository of those unwieldy loyalty cards they carry from everyone from giant retail chains to the corner bakery. And your smartphones will serve as beacons that will alert a retailer when you walk into its store so that it can recommend products, show you reviews, or direct you to aisle five, where that beanbag chair you didn't buy last week still beckons - and you can now have it for 10% off. You won't even need a few singles to tip the valet or pay the dog walker, because they'll take mobile payments too."

However, Helft predicts, "retailers and their partners will have to offer mainstream shoppers some pretty sweet perks to get them to replace a swipe of a plastic card with a tap of a phone."

If you're in the online/mobile payments space or want to learn what the future of payments might look like, this is a must-read article. Let us know what you think, and what you'd like to see in your "digital wallet" both as a shopper and as a merchant.




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Readers Comments

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This user has validated their user name. by: basset

Mon Jul 9 15:21:56 2012

ORGANIZER - Something to keep track of loyalty cards - yes  Just use the word ''organizer'' and my heart goes pitty-pat. Gift cards, maybe - I hate carrying a pile of GC's around that have just a couple bucks left on the balance.

CARD READER - don't need one at this point but it is nice to know it is available

FOR PAYMENTS - a bit worrisome. I have not used mobile payments as of yet. Some of my customers have had duplicate payments (to me) issues while using mobile payments. I've had it happen 3 times in the past 2 months. They were unaware until I contacted them. A bit scary.

BOARDING PASS - No, not at this time.  Too much potential to ruin my day.

TRACKING DEVICE FOR MY SHOPPING HABITS - Nope, don't want to go there. Google is already creeping me out a bit if I search & forget to log out first. So - I'm a dinosaur.

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This user has validated their user name. by: Ming the Merciless

Mon Jul 9 15:55:36 2012

I don't care whether they're located on Wall Street, Main Street, or Silicon Valley, banksters are banksters.

Unless and until feds start regulating how much and what kind of personal information they can gather, use, and sell individual privacy rights will very soon become one of those quaint notions of the past.

Unless the feds create decent regulations, you can expect all sorts of nefarious schemes to monetize their operations while demonetizing yours and your mobile customers so tread carefully.

Moreover, what's to stop Goldman Sachs, the mastermind behind the Greek financial collapse, or any of their sociopathic Wall Street competitors from creating derivatives out of dead beat online buyers like they did with home owners they knew couldn't pay?

The card user will get burned and the seller will get burned as these criminal pack of rabid jackals march toward world domination of YOUR money.

The answer is absolutely nothing is in place to mitigate or prevent the same kind predatory capitalism with mobile payments that we already see with 37% APR credit cards. All they have to do is to attach a "convenience" surcharge or some such fiction to mobile payments.

Further, the growth paradigm will be the same as PreyPal. Palatable initial terms for merchants and then, after the market shakes out, Katy bar the door.

Good luck in ferreting out the best of the worst.

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by: Susan Averello This user has validated their user name.

Mon Jul 9 16:34:17 2012

Cash is already dead to me. I only keep a little cash on me for food carts in NY. I use my debit card for everything, if they don't take it I move on.
All our bills are paid electronically, have used electronic boarding passes, god to be rid of pennies and nickles that got more to make that they are worth- and all the other mess. I definitely prefer electronic payments of all sort  

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This user has validated their user name. by: Philip Cohen
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Mon Jul 9 18:50:24 2012

“Square” offers a perfectly real solution for the receiving of payments by credit card away from a fixed location; that is probably why Visa already has a stake in Square. Don’t take any notice of the PR spin; Visa will ultimately push Square for an eventual NFC capacity for reasons of greater security if nothing else.

The rest of the predictions in this story are pie in the sky and read like the nonsense we have come to expect from the eBay Dept of Spin. For anyone with a brain larger than the size of a pea, that has ever examined the contents of a wallet or purse, the likelihood that the smart phone will, any day, literally replace your wallet or purse, is simply nonsense …

As for PreyPal online, with V.me in beta testing at buy.com, PreyPal is fast approaching its “use by” date in the world of real online commerce …

As for PreyPal at Home Depot or any other physical point of sale—LOL …

Put your money on any ultimate solution being from the retail banks in cahoots with Visa and MasterCard, with a bit left over for the Amex snobs …

Yes, the “banksters”, like all big commercial entities, are greedy grubs but at least they will peel the pennies off you in a professional manner, as they have always done …

eBay / PayPal / Donahoe: Dead Men Walking

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This user has validated their user name. by: Nan
Web Site

Tue Jul 10 08:32:15 2012

I became acquainted with the Square at our annual Blues Festival here in town.  Someone had one that we were able to use at the ticket gate. We used it on an iPad with WiFi.  

The Register ap was easily programmed for three different entry prices, you swipe the card, select the charge price, and the customer signs right on the screen with his finger.  If they want a receipt, they enter their email on a visual keyboard.    

You download the day's receipts report from the website at the end of the day, or the information is available in real-time as well.

It was pretty cool.  

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This user has validated their user name. by: Al G

Tue Jul 10 09:27:30 2012

I can't wait to drive into the parking lot of my local mega-mall & have my phone/tablet start buzzing, blinking, pop-upping with all of these offers I was missing during since the last time I sat in Santa's lap.

Unless you are going to turn off your phone, or there is an app or 20 for suppressing annoying messages/texts/advertising (should you want to), your phone will run out of juice before you can walk to the 1st store you wanted to go to!

It is a marketer's dream, and a (rational) consumer's nightmare.

My god, or gods! Just another gadget to consume your time, grab for your attention in the guise of "modern life".

Nothing wrong with merchants, say at the corner hot dog stand in NYC or the farmer's market taking mobile payments though. It's just the thought of the marketing possibilities that makes me want to contemplate sitting on top of Mt St. Helens.

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by: RCL This user has validated their user name.

Tue Jul 10 10:41:49 2012

There is so much to be said for being ''first to stick''. I love Pay Pal, as buyer and seller. My customers asked for it, and I have never regretted moving to it. I do think the ''stickiest'' technology will be the most service-focused (rather than gadget-focused). I stopped making political contributions until they implemented Pay Pal. Now, whenever I buy online, I look for Pay Pal, and see it in more and more places. Good thing--eBay is going to need it. I think Pay Pal is the Amazon of online payers.

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This user has validated their user name. by: Philip Cohen

Tue Jul 10 17:42:15 2012

Dream on, RCL ...

eBay / PayPal / Donahoe: Dead Men Walking

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This user has validated their user name. by: Bijoux Dragon
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Tue Jul 10 23:26:34 2012

@ming - truth spoken as usual1

Here's a shock - I don't own a cell phone, neither smart phone nor idiot phone.  Haven't for 2 years by personal choice - I'd rather spend my money on vintage jewelry.  I am perfectly able to go to the store without constant contact with home and I can honestly say the phone has not been missed one iota.  Just call me the happy luddite!

As for readers at shows, the risk isn't worth the potential reward.  The system is ripe to be plucked by thieves and con artists.  never had a charge back (knocking on wood) and don't want to start now.  Would I ever use PayPal in a B&M establishment - NO!

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This user has validated their user name. by: Tula

Tue Jul 10 23:37:56 2012

Philip, please don't diss Amex! I love my Amex. I saved a lot of money on business travel and have earned enough reward point on it to take multiple cross-country airline trips (first class, even). Nothing "snobbish" about saving yourself some money.

As for Paypal, you're right on. I'm watching this space closely, since I'm involved with a startup who is somewhat in the mobile payments area (with some interesting twists I'm not at liberty to reveal). Paypal has already lost first-mover status to Square and with the "big guns" like V.me and others, I think it's going to be an interesting battle.

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by: Digmen1 This user has validated their user name.
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Wed Jul 11 01:42:36 2012

Paypal is used all over the world so I don't see them going away any time soon.
Its the fat cat banks with their high transfer fees that are going to miss out.

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This user has validated their user name. by: Philip Cohen
Web Site

Wed Jul 11 03:16:29 2012

@Tula,
I too have an Amex, albeit one issued by my retail banker and attached to my Commonwealth Bank issued MasterCard account! Of course my Amex is not a ''real'' Amex, it's only a ''badged'' bank card from which Amex gets a cut of the fee. I could never see the point in applying for a real Amex: too much trouble; and I get points on my MasterCard anyway ...

@Digman1,
The fact is, now that Visa’s V.me is beta testing on buy.com, PreyPal is fast approaching its ''use by'' date with any online business of any substance outside of PreyPal's effectively mandated place on the ever atrophying eBay marketplace. If you really  think that merchants of substance will stay with PreyPal once V.me is released generally, you are living on a different planet to the one I am on … By the way, the banks charge no more than PreyPal; you’ve been listening to too much nonsense from the eBay Dept of Spin. And, as for PreyPal at Home Depot or at any other physical point of sale—LOL …

And, as for the eBay marketplace ...

“Shill Bidding Fraud on eBay: Case Study #5”
www.ecommercebytes.com/forums/vbulletin/showthread.php?p=1675
54

eBay
/ PayPal / Donahoe: Dead Men Walking

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by: salesrep1 This user has validated their user name.

Wed Jul 11 17:27:59 2012

Actually Phiipp the merchant banks do charge more because you have a monthly fee up to $30 and high mileage cards can go as high as 5% on reconciliation plus mc and visa charge a transaction fee of up to .25 per transaction.
Paypal actually absorbs those fees.
You also have the $75 1 time psr to get you certified that you are in compliance with not holding on to cc #s on an internet computer or device.
Afterwards the yearly ritual of getting certified for a small biz can be a pain.
I actually use both Paypal and a Merchant bank not a big fan of either.
On a whole they can speed the process of oh the checks in the mail.
When we didn't use either my bounced check ratio was less than 1 percent now with either my overall fees are closer to 5%.

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by: Digmen1 This user has validated their user name.
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Wed Jul 11 22:26:55 2012

@Philip
Vme being tested does not mean it is being used yet or that it will catch up to Paypal.

As I keep saying Paypal is well accepted all over the world and its cheap.

The banks have never liked direct transfer and have charged high prices to send money.

I do not listen to ebay about Paypal. I was a user of Paypal before I joined ebay, and I buy and sell things with Paypal direct.
(as well as ebay)

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by: Mr. Me This user has validated their user name.

Thu Jul 12 00:30:08 2012

Bidpay was great, it wasnt "abandoned" it was killed by the ebay/paypal monopoly....

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This user has validated their user name. by: Philip Cohen
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Thu Jul 12 16:25:28 2012

@Digmen1, Well when the eBafia Don tries to hive off PreyPal as a separate IPO, you should buy lots of shares ... Me, I'm going to stick with my retail banker and MasterCard/Amex ...

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by: unusual1 This user has validated their user name.
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Fri Jul 13 00:04:16 2012

I have used Square twice. The first time no problem. The second tine - I will NEVER use them again. I had a small sale on 6/25, it took until today, 7/11 to have the money deposited in my bank. So much for their 36 hour supposed payment time table. I am going to try payanywhere. I need this service as I do antique shows and it is the most convenient available. They are all pretty bad but a ''necessary evil'' if you cant have a computer handy.



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